The Stock Index Report by Carley Garner

October 27th, 2008


Weak overnight trade fails to dominate the day session.


Similar to last week's limit down overnight session that was eventually followed with surprisingly stable equity trade, the futures markets recovered from large losses sustained while many of us were fast asleep. I have to admit, as a 401k holder I would prefer for much of the horror to occur while I can't see what is going on. Unfortunately, these times call for a head in the sand approach for long term investors.

If you are reading this newsletter, you are probably doing so with much shorter time horizons. As much as I hate to say it, this bear move doesn't appear to be over. Stocks are going to continue to struggle making any upside progress until active traders kick the habit of selling into rallies. Clearly this could have been a rewarding strategy had you been able to time the peaks and valleys. Traders don't easily forget what has been working for them.

Popular television market commentators continue to speak of the capitulation selling that will finally allow the market to bottom. However, I would like to see capitulation of the shorts not the longs. In my opinion, only a massive short squeeze will be capable of changing the mindset of the market. In other words, until short traders are forced to "pay the price", they will continue to sell rallies and stocks will continue to struggle.

Alfred E. Goldman, chief market strategist at Wachovia Securities commented on the day's volatile but bearish trade. "We were trading higher earlier on very light volume, but the buyers just couldn't gather enough momentum to keep it going," he added, "When confidence is razor-thin, the nervous tension goes way up and bam, the sellers take over."

My models are showing the next pit-stop in the December S&P futures at 798 and again at 792. The Dow should find support near 7,525 and the NASDAQ seems to be looking towards 1105.


Please note: A mini S&P chart is used because it is better for charting purposes, but trade recommendations are based the full sized S&P unless otherwise noted.


S&P 500 Futures and Options Trading Recommendations
**There is unlimited risk in naked option selling and futures trading

Position Trade -

October 22 - Sell the November 500 put for $4 or better. It will take substantial weakness for this to get filled.

October 22 - Buy lottery tickets on the dip! I like the November 1050 calls for $6 in premium.

Please note: A mini-sized Dow chart is used because it is better for charting purposes, but trade recommendations are based the full sized Dow unless otherwise noted.


Dow Jones Futures and Options Trading Recommendations
**There is unlimited risk in naked option selling and futures trading


Position Trade -

Flat

Please note: A mini-NASDAQ chart is used because it is better for charting purposes, trade recommendations will denote whether a mini or full sized contract should be used.


NASDAQ Futures and Options Trading Recommendations
**There is unlimited risk in naked option selling and futures trading

Swing Trade -

Flat







There is substantial risk of loss in trading futures and options.


Past performance is not indicative of future results. The information and data in this report were obtained from sources considered reliable. Their accuracy or completeness is not guaranteed and the giving of the same is not to be deemed as an offer or solicitation on our part with respect to the sale or purchase of any securities or commodities. Any decision to purchase or sell as a result of the opinions expressed in this report will be the full responsibility of the person authorizing such transaction.
 
October 28th, 2008


Stocks rebound, but momentum lacking.


Stock index futures gapped much higher on the open of day session trading and managed to maintain an overall bid throughout the day. Higher markets overseas paved the way for bargain hunting and likely short covering.

Speaking of short covering, what is being referred to as the "mother of all short squeezes" occurred in Volkswagen shares. Shares more than doubled on the day to peak near $230 but began their journey at a price of under $60 per share. The sharp reversal came on the heels of an announcement by Porsche that they will be increasing ownership in the firm.

Volkswagen is the most shorted stock in the German stock index the DAX. Nearly 13% of the firm's shares are traded on loan, mostly with short selling intent. I am confident that those short this stock wish that they had never bothered. In yesterday's report, I mentioned that in order for this market to turn around we will need a massive short squeeze in order to shake up the bears. The Volkswagen squeeze is on a much smaller scale than it will take to forge a sustainable bottom in equities but it is a good sign.

Consumer confidence plunged to a 41 year low to 38; economists were looking for a number closer to 50. This leaves many to wonder whether we will ever see light at the end of the tunnel. Keep in mind that consumer spending accounts for nearly two-thirds of economic growth and it was the consumer that kept the economy afloat in recent downturns. This is especially disconcerting given the quickly approaching holiday shopping season.

According to Jack Ablin, chief investment officer at Harris Private Bank in Chicago, "The market already reflects a very, very poor outlook. That said, these numbers are coming in a way lower than expected." He added, "Consumer confidence is a pretty good predictor of retail sales."

If consumers act as sick as they feel, we have a long road ahead of us. Fortunately, the markets tend to turn around far before the economy ever does. Regardless, as much as I would like to, I am not "buying" today's market bounce. It seems as though we have at least one more trip to the lows and possibly moderately beyond.

I have slightly adjusted my targets, I see the December S&P futures trading near 789 in the near future and the Dow near 7,580 and NASDAQ futures seems to be looking towards 1105.


Please note: A mini S&P chart is used because it is better for charting purposes, but trade recommendations are based the full sized S&P unless otherwise noted.


S&P 500 Futures and Options Trading Recommendations
**There is unlimited risk in naked option selling and futures trading

Position Trade -

October 22 - Sell the November 500 put for $4 or better. It will take substantial weakness for this to get filled.
• Liquidate this option at the market, you should be able to take a profit of about $2 ($500). Clients were advised to cancel the order to enter this trade before it was filled.

October 22 - Buy lottery tickets on the dip! I like the November 1050 calls for $6 in premium.

Please note: A mini-sized Dow chart is used because it is better for charting purposes, but trade recommendations are based the full sized Dow unless otherwise noted.


Dow Jones Futures and Options Trading Recommendations
**There is unlimited risk in naked option selling and futures trading


Position Trade -

Flat

Please note: A mini-NASDAQ chart is used because it is better for charting purposes, trade recommendations will denote whether a mini or full sized contract should be used.


NASDAQ Futures and Options Trading Recommendations
**There is unlimited risk in naked option selling and futures trading

Swing Trade -

Flat





There is substantial risk of loss in trading futures and options.


Past performance is not indicative of future results. The information and data in this report were obtained from sources considered reliable. Their accuracy or completeness is not guaranteed and the giving of the same is not to be deemed as an offer or solicitation on our part with respect to the sale or purchase of any securities or commodities. Any decision to purchase or sell as a result of the opinions expressed in this report will be the full responsibility of the person authorizing such transaction.
 
October 29th, 2008


Fed decision dominates trade.


It was a sideways session ahead of the Fed's long awaited interest rate decision. Most investors and economists came into the day with expectations of a 50 basis point cut. As always, there was speculation in regards to the possibility of smaller or wider rate cuts. Additionally, with the policy move already incorporated into prices it is the statement surrounding the monetary policy that was capable of a market reaction.

Trading into an announcement such as this is what I like to refer to as a "crapshoot" (I am from Vegas). Prior to the release, there was potential for the market to retreat on the announcement because it has already priced in the news, rally on the idea of further cuts down the road or simply shrug it off as a non-event. Accordingly, I feel as though it is better to be flat going into the event and look to position after the fact if an opportunity presents itself.

As it turns out, the Fed dropped the Fed Fund target rate as well as the discount window rate by 50 basis points and the markets, for the most part, took it in stride. While the rate cut is seen as a stimulus to the economy the Fed made it very clear that growth prospects remain challenged despite the changes in monetary policy.

To put today's move into perspective, this was the second half of a point cut this month. The new Fed Funds target rate sits at 1% a rate not seen since 2003 and 2004. The overnight rate hasn't been below 1% since 1958 during the Eisenhower era.

The Fed wasn't as talkative as it sometimes is regarding the decision. In a brief statement the Fed claimed, "Intensification of financial market turmoil is likely to exert additional restrain on spending, partly by further reducing the ability of households and business to obtain credit."

The indices have reached significant resistance levels, and seem to be getting heavy. Without a close above 960 in the coming days, the S&P may fall victim to the bears. The result could be prices in the low 800's. A close above 960 on the other hand could lure short covering and late coming buyers to push the index back above 1,100...However, I am leaning lower in all of the major indices.


Please note: A mini S&P chart is used because it is better for charting purposes, but trade recommendations are based the full sized S&P unless otherwise noted.


S&P 500 Futures and Options Trading Recommendations
**There is unlimited risk in naked option selling and futures trading

Position Trade -

October 22 - Sell the November 500 put for $4 or better. It will take substantial weakness for this to get filled.
• Liquidate this option at the market, you should be able to take a profit of about $2 ($500). Clients were advised to cancel the order to enter this trade before it was filled.

October 22 - Buy lottery tickets on the dip! I like the November 1050 calls for $6 in premium.
• Clients were advised to liquidate these on October 29th near $15.50 for a profit of $475 (in the mini, $2,375 if you trade the full sized).

October 29 - Clients were advised to purchase the November mini S&P 700 puts, fills were at or near $6 or $300.

Please note: A mini-sized Dow chart is used because it is better for charting purposes, but trade recommendations are based the full sized Dow unless otherwise noted.


Dow Jones Futures and Options Trading Recommendations
**There is unlimited risk in naked option selling and futures trading


Position Trade -

Flat

Please note: A mini-NASDAQ chart is used because it is better for charting purposes, trade recommendations will denote whether a mini or full sized contract should be used.


NASDAQ Futures and Options Trading Recommendations
**There is unlimited risk in naked option selling and futures trading

Swing Trade -

Flat





There is substantial risk of loss in trading futures and options.


Past performance is not indicative of future results. The information and data in this report were obtained from sources considered reliable. Their accuracy or completeness is not guaranteed and the giving of the same is not to be deemed as an offer or solicitation on our part with respect to the sale or purchase of any securities or commodities. Any decision to purchase or sell as a result of the opinions expressed in this report will be the full responsibility of the person authorizing such transaction.
 
October 31st, 2008


Not so spooky stocks.


After trading lower in overnight trade, the major stock index futures were able to shrug off questionable economic data and forge new highs. While I questioned the ability of stocks to maintain gains earlier in the week, the market has traded consistently above what I have deemed to be "make or break" levels.

Accordingly, the upward momentum seems to be sustainable in the near term. The S&P 500 futures seem to be looking higher toward 1050, while the Dow may not run into significant resistance until reaching 9,917. If you are a NASDAQ trader, look for the December futures to travel to 1441.

As I was writing this newsletter, the markets were on pace for the best weekly gain ever. Keep in mind that the month of October was the worst month ever recorded in the markets. October 2008 also saw the highest VIX reading (based on the "new" calculation) and the subsequent. Records were meant to be broken, but things seem to have gotten out of hand.

If you recall, several weeks ago we mentioned that October has been dubbed the "bear killer" but the Stock Trader's Almanac as well as other historians. October has buried 6 of the last 10 bear markets over the previous 60 years and this October seems to be living up to expectations. While we won't truly know whether or not the absolute bottom has been made for several months, it seems that the market has at minimum fended off the worst case scenario; complete devastation of our financial markets.

November, on the other hand, is notorious for being an overall positive month for equities. It has been the best month for the S&P 500 since 1950 and the third best for the Dow, and the second best for the NASDAQ in the same time frame. with that said, election years tend to produce even more consistent gains in the month of November for the Dow and S&P. Something that you may also find interesting; according to the Stock Traders' Almanac, the day before and after Thanksgiving combined have only produced 10 losses in the previous 55 years.

Whether you are a Republican, Democrat or Independent it may be helpful to know that the last 8 Republican victories averaged gains of approximately 3% in the S&P 500 while the last 7 Democratic wins produced gains of just 0.4%.

Boo!


Please note: A mini S&P chart is used because it is better for charting purposes, but trade recommendations are based the full sized S&P unless otherwise noted.


S&P 500 Futures and Options Trading Recommendations
**There is unlimited risk in naked option selling and futures trading

Position Trade -

October 22 - Buy lottery tickets on the dip! I like the November 1050 calls for $6 in premium.
• Clients were advised to liquidate these on October 29th near $15.50 for a profit of $475 (in the mini, $2,375 if you trade the full sized).

October 29 - Clients were advised to purchase the November mini S&P 700 puts, fills were at or near $6 or $300.

Please note: A mini-sized Dow chart is used because it is better for charting purposes, but trade recommendations are based the full sized Dow unless otherwise noted.


Dow Jones Futures and Options Trading Recommendations
**There is unlimited risk in naked option selling and futures trading


Position Trade -

Flat

Please note: A mini-NASDAQ chart is used because it is better for charting purposes, trade recommendations will denote whether a mini or full sized contract should be used.


NASDAQ Futures and Options Trading Recommendations
**There is unlimited risk in naked option selling and futures trading

Swing Trade -

Flat





There is substantial risk of loss in trading futures and options.


Past performance is not indicative of future results. The information and data in this report were obtained from sources considered reliable. Their accuracy or completeness is not guaranteed and the giving of the same is not to be deemed as an offer or solicitation on our part with respect to the sale or purchase of any securities or commodities. Any decision to purchase or sell as a result of the opinions expressed in this report will be the full responsibility of the person authorizing such transaction.
 
November 3rd, 2008


Lower VIX welcomed, but election volatility looming.


Stock traders enjoyed one of the tamest trading sessions in recent months. After peaking at just under 90, the CBOE's volatility index (VIX) has made its way to the mid-50's. Three years ago this would have been viewed as an astronomical figure, today it is a relief.

Stocks suffered at the hands of weak manufacturing data but the avoidance of mass liquidation was seen as a positive. The market doesn't seem to be interested in the "small potatoes" given the Presidential election and Friday's employment data. Nonetheless, the Institute for Supply Management reported that its manufacturing index fell to its lowest level in 26 years to a reading of 38.9. The last time that the index has seen such levels was in September of 1982.

Trade looked to be on hold for much of the day in anticipation of tomorrow's presidential election. As mentioned last week, November is one of the strongest months of the year for stocks and this is especially true in election years. While a Democratic victory tends to see immediate selling pressure in equities, the market typically recovers by month's end. On the contrary, a Republican victory has historically been celebrated on the Wednesday following the election by a stock market rally.

History suggests that Wall Street favors the GOP but many stock traders claim to be indifferent. However, they prefer to have the uncertainty surrounding the outcome behind them.

The recent rally seems to have been ignited by the realization that we may have dodged the second great depression, but there is no question that a deep recession is underway. With that said, while stocks may see another retest of the lows at such levels the market was pricing in a near worst case scenario.

I am looking for moderately higher prices in the major stock indices. The S&P could and should make its way to 1035 and maybe even 1050 as there is said to be a lot of buy stops at and above the 1000 mark. The Dow is on target to see the mid 9,700's in the coming days.

The question as to whether the gains can hold is still up for debate. Perhaps it would be a good play to shop around for long e-mini put option on a rally above 1035. At that point they should be cheap and if we are right, could become nicely profitable.


Please note: A mini S&P chart is used because it is better for charting purposes, but trade recommendations are based the full sized S&P unless otherwise noted.


S&P 500 Futures and Options Trading Recommendations
**There is unlimited risk in naked option selling and futures trading

Position Trade -

October 22 - Buy lottery tickets on the dip! I like the November 1050 calls for $6 in premium.
• Clients were advised to liquidate these on October 29th near $15.50 for a profit of $475 (in the mini, $2,375 if you trade the full sized).

October 29 - Clients were advised to purchase the November mini S&P 700 puts, fills were at or near $6 or $300.

Please note: A mini-sized Dow chart is used because it is better for charting purposes, but trade recommendations are based the full sized Dow unless otherwise noted.


Dow Jones Futures and Options Trading Recommendations
**There is unlimited risk in naked option selling and futures trading


Position Trade -

Flat

Please note: A mini-NASDAQ chart is used because it is better for charting purposes, trade recommendations will denote whether a mini or full sized contract should be used.


NASDAQ Futures and Options Trading Recommendations
**There is unlimited risk in naked option selling and futures trading

Swing Trade -

Flat







There is substantial risk of loss in trading futures and options.


Past performance is not indicative of future results. The information and data in this report were obtained from sources considered reliable. Their accuracy or completeness is not guaranteed and the giving of the same is not to be deemed as an offer or solicitation on our part with respect to the sale or purchase of any securities or commodities. Any decision to purchase or sell as a result of the opinions expressed in this report will be the full responsibility of the person authorizing such transaction.
 
November 5th, 2008


Six day winning streak comes to an end.


After six positive day for the domestic stock indices, Wall Street took a breather. U.S. stocks suffered losses of nearly 3% on the day following gloomy economic data and an election night hangover.

According to ADP's estimates of Friday's non-farm payroll data, the U.S. economy lost over 150 thousand jobs last month. While ADP has yet to prove its accuracy, it seems to be relatively safe to assume that job losses are accumulating at a quick pace. Analysts are looking for numbers closer to 200 thousand, but anything in that general ballpark will likely weigh on the market. It seems as though the market will need a reading of 130 thousand or less to avoid another wave of selling.

The Institute for Supply Management added to the bearish tone with the release of their non-manufacturing (service) index. The index was reported to be well into contraction territory (below 50) at 44.4. In case you were wondering, the services sector represents about 80% of the domestic economy and includes activities such as banking, air transportation, hotels and restaurants.

Today's post-election plunge is somewhat in line with historical standards. As we have mentioned before, the equity markets have a tendency to rally on a Republican victory and sell-off on a Democratic. On average, S&P losses are approximately 1% making today's move a little more dramatic. However, given economic conditions and the frailty of the financial markets today's move wasn't necessarily surprising.

I was hoping for a little more out of this rally, but the tide may have turned. The markets will have to get off to a good start tomorrow, or we will likely see another run at the October lows. Critical support in the S&P lies at 940, while resistance is at 1020 and 1035.

The Dow on the other hand, did meet our upside target and seems to have sharply reversed course. 8,927 must hold in order to avoid the seemingly inevitable retest of the lows. Similarly, the NASDAQ must hold above 1300 to avoid panic sellers.

Hopefully you were able to buy the November e-mini 850 puts as recommended in yesterday's newsletter!


Please note: A mini S&P chart is used because it is better for charting purposes, but trade recommendations are based the full sized S&P unless otherwise noted.



S&P 500 Futures and Options Trading Recommendations
**There is unlimited risk in naked option selling and futures trading

Position Trade -

October 29 - Clients were advised to purchase the November mini S&P 700 puts, fills were at or near $6 or $300.

November 4 - Buy the November e-mini S&P 850 puts for $6 or less

Please note: A mini-sized Dow chart is used because it is better for charting purposes, but trade recommendations are based the full sized Dow unless otherwise noted.


Dow Jones Futures and Options Trading Recommendations
**There is unlimited risk in naked option selling and futures trading


Position Trade -

Flat


NASDAQ Futures and Options Trading Recommendations
**There is unlimited risk in naked option selling and futures trading

Swing Trade -

Flat





There is substantial risk of loss in trading futures and options.


Past performance is not indicative of future results. The information and data in this report were obtained from sources considered reliable. Their accuracy or completeness is not guaranteed and the giving of the same is not to be deemed as an offer or solicitation on our part with respect to the sale or purchase of any securities or commodities. Any decision to purchase or sell as a result of the opinions expressed in this report will be the full responsibility of the person authorizing such transaction.
 
November 6th, 2008


Global rate cuts and economic worries weigh on stocks.


Stocks extended losses following massive global rate cuts and ahead of the dreaded non-farm payrolls data. Adding to the bearish tone, retailers reported weak sales for October and Cisco Systems claims to be experiencing slumping demand.

Stocks have lost approximately 10% in the last two trading sessions, leaving the market with the worst two day record since 1987. Unfortunately for my retirement account, I don't think that the carnage is over.

In theory massive rate cuts overseas should have been equity market friendly. However, the manner and magnitude of the cuts made by the Bank of England and the European Central Bank seemed to panic the global markets. The Bank of England slashed its key interest rate by a stunning 1.5%, while the ECB took rates down a by 50 basis points. Investors seemed to interpret the drastic central bank moves as a panicked response. Accordingly, fears of a "depression" were rekindled.

All eyes are on tomorrow's employment numbers. Consensus estimates are looking for a draw of nearly 200,000 jobs in the month of October as opposed to 157,000 in September. It seems like the tone is already set for another weak number, so the chances of a downside surprise seem slim. Regardless, the market sentiment is the lowest that I have ever seen and the market will likely be reluctant to rally on a positive reading. If stocks to bounce on the announcement, I would expect the indices to be met with selling pressure.

The S&P faces significant resistance near 940 and the Dow near 8,950. The indices seem to be looking lower with the downside target in the S&P 848 and the Dow near 8,133. We are looking for the NASAQ to see 1163 by early next week.

Hopefully you were able to buy the November e-mini 850 puts as recommended on the 4th newsletter!


Please note: A mini S&P chart is used because it is better for charting purposes, but trade recommendations are based the full sized S&P unless otherwise noted.


S&P 500 Futures and Options Trading Recommendations
**There is unlimited risk in naked option selling and futures trading

Position Trade -

October 29 - Clients were advised to purchase the November mini S&P 700 puts, fills were at or near $6 or $300.

November 4 - Buy the November e-mini S&P 850 puts for $6 or less
• If you were able to get in on this trade, place an order to sell it at $27 or better (don't get greedy, if you can get out for a little less take it).

Please note: A mini-sized Dow chart is used because it is better for charting purposes, but trade recommendations are based the full sized Dow unless otherwise noted.


Dow Jones Futures and Options Trading Recommendations
**There is unlimited risk in naked option selling and futures trading


Position Trade -

Flat

Please note: A mini-NASDAQ chart is used because it is better for charting purposes, trade recommendations will denote whether a mini or full sized contract should be used.


NASDAQ Futures and Options Trading Recommendations
**There is unlimited risk in naked option selling and futures trading

Swing Trade -

Flat





There is substantial risk of loss in trading futures and options.


Past performance is not indicative of future results. The information and data in this report were obtained from sources considered reliable. Their accuracy or completeness is not guaranteed and the giving of the same is not to be deemed as an offer or solicitation on our part with respect to the sale or purchase of any securities or commodities. Any decision to purchase or sell as a result of the opinions expressed in this report will be the full responsibility of the person authorizing such transaction.
 
November 7th, 2008


Stocks take employment report and GM earnings in stride.


After one of the largest two day drops in history, the domestic indices traded in positive territory despite another onslaught of crippling economic news. The term "dead-cat bounce" is being used by many to describe Friday's action but only time will tell.

The unemployment rate soared to a 14 year high of 6.5% in the month of October. Knowing this, it isn't surprising to see that the economy lost another 240,000 jobs last month. The numbers were much bleaker than economists were looking for but better than the market had priced in. Simply put, investors had accounted for the worst case scenario in the Wednesday and Thursday plunge making reality seem like a positive.

To put these numbers into perspective; if you recall, the recession following the tech bubble and September 11th, peaked at 6.3%. Similarly, the October decline in jobs marked the 10th consecutive month of reductions. This brings us to a total of 1.2 million job losses on the year with a little over half of this occurring in the most recent three months.

As if news of massive job losses wasn't enough to ruin our weekend; GM reported a $2.5 billion third quarter loss and claims that it may run out of cash in 2009. According to the automaker, the firm is burned through cash at a pace of $6.9 billion during the 3rd quarter. According to company insiders, "Even if GM implements the planned operating actions that are substantially within its control, GM's estimated liquidity during the remainder of 2008 will approach the minimum amount necessary to operate its business."


I am not convinced that today's bounce has thwarted the selling efforts in equities. While I respect the market's ability to move to 940 in the S&P, 8,960 in the Dow and 1300 in the NASDAQ in the near term; I believe that it is likely that such levels will be met with selling pressure. I stand by my assumption that we are still on our way lower. My downside targets have been moderately revised to 1166 in the NASDAQ, 850 in the S&P and 8,140 in the Dow.


Please note: A mini S&P chart is used because it is better for charting purposes, but trade recommendations are based the full sized S&P unless otherwise noted.


S&P 500 Futures and Options Trading Recommendations
**There is unlimited risk in naked option selling and futures trading

Position Trade -

October 29 - Clients were advised to purchase the November mini S&P 700 puts, fills were at or near $6 or $300.
• November 7 - These are underwater, but not out of the question. Place an order to sell them at or near $15.


November 4 - Buy the November e-mini S&P 850 puts for $6 or less
• November 6 - If you were able to get in on this trade, place an order to sell it at $27 or better (don't get greedy, if you can get out for a little less take it).
• November 7 - You should be out of this trade. Assuming that you were able to get in for $6 and out for $25 you would have been profitable by $950 before commissions and fees.

Please note: A mini-sized Dow chart is used because it is better for charting purposes, but trade recommendations are based the full sized Dow unless otherwise noted.


Dow Jones Futures and Options Trading Recommendations
**There is unlimited risk in naked option selling and futures trading


Position Trade -

Flat

Please note: A mini-NASDAQ chart is used because it is better for charting purposes, trade recommendations will denote whether a mini or full sized contract should be used.


NASDAQ Futures and Options Trading Recommendations
**There is unlimited risk in naked option selling and futures trading

Swing Trade -

Flat






There is substantial risk of loss in trading futures and options.


Past performance is not indicative of future results. The information and data in this report were obtained from sources considered reliable. Their accuracy or completeness is not guaranteed and the giving of the same is not to be deemed as an offer or solicitation on our part with respect to the sale or purchase of any securities or commodities. Any decision to purchase or sell as a result of the opinions expressed in this report will be the full responsibility of the person authorizing such transaction.
 
November 10th, 2008


Stocks under pressure despite Chinese stimulus package.


Stocks suffered from what appeared to be a delayed reaction to Friday's employment numbers and early morning warnings from Circuit City and AIG (again). The major indices enjoyed a healthy bid on the open of electronic trading yesterday afternoon and for the most part carried it into the open of the day session. However, buyers were scarce and another round of selling ensued.

Investors were excited about China's plans to aid its economy via a mix of spending, subsidies, looser credit policies and tax credits. The package could help many of the commodity based stocks as well as global businesses such as General Electric. However, reality soon sunk in as traders were left with the rest of the day to contemplate.

The lack of economic news reported in today's session, and in the next two sessions for that matter, gives investors time to dwell on what has been released in recent weeks. Overall, the data has painted a bleak picture; the longer that the market has to sulk, the "worse" things could become. My instinct tells me that we could be in store for another retest of the October lows, or at least 855 in the December S&P futures and 8,160 in the December Dow futures. However, if I am right it will likely occur by the end of this week. My floor brokers are reminding me of option expiration coming up next week and the tendency for the indices to find a low on the Thursday or Friday preceding expiration.

Adding salt to the wounds of corporate America, retailer Circuit City filed for bankruptcy protection on Monday. This news comes on the heels of an auto-industry with their hands out and another aid package given to AIG.

Even at levels that seem to be "cheap" in terms of book values, P/E ratios, etc. investors aren't willing to acquire risky assets. Instead they are favoring the guaranteed, but low yields, provided by U.S. Treasury securities. According to Hugh Johnson of Jonson Illington Advisors, "They'd like to be optimistic, but individual investors are still very worried."

In my opinion, the late day recovery from the lows wasn't enough to turn the tide. I have revised my downside targets somewhat, but nonetheless I am still looking lower. I see the potential for the S&P 500 futures to trade at or near 855 in the coming sessions. Likewise, the Dow could easily see prices near 8,160 and the NASDAQ 1177.



Please note: A mini S&P chart is used because it is better for charting purposes, but trade recommendations are based the full sized S&P unless otherwise noted.


S&P 500 Futures and Options Trading Recommendations
**There is unlimited risk in naked option selling and futures trading

Position Trade -

October 29 - Clients were advised to purchase the November mini S&P 700 puts, fills were at or near $6 or $300.
• November 7 - These are underwater, but not out of the question. Place an order to sell them at or near $15.


November 4 - Buy the November e-mini S&P 850 puts for $6 or less
• November 6 - If you were able to get in on this trade, place an order to sell it at $27 or better (don't get greedy, if you can get out for a little less take it).
• November 7 - You should be out of this trade. Assuming that you were able to get in for $6 and out for $25 you would have been profitable by $950 before commissions and fees.

Please note: A mini-sized Dow chart is used because it is better for charting purposes, but trade recommendations are based the full sized Dow unless otherwise noted.


Dow Jones Futures and Options Trading Recommendations
**There is unlimited risk in naked option selling and futures trading


Position Trade -

Flat

Please note: A mini-NASDAQ chart is used because it is better for charting purposes, trade recommendations will denote whether a mini or full sized contract should be used.


NASDAQ Futures and Options Trading Recommendations
**There is unlimited risk in naked option selling and futures trading

Swing Trade -

Flat






There is substantial risk of loss in trading futures and options.


Past performance is not indicative of future results. The information and data in this report were obtained from sources considered reliable. Their accuracy or completeness is not guaranteed and the giving of the same is not to be deemed as an offer or solicitation on our part with respect to the sale or purchase of any securities or commodities. Any decision to purchase or sell as a result of the opinions expressed in this report will be the full responsibility of the person authorizing such transaction.
 
November 11th, 2008


Disappointing Toll Brothers earnings set the tone on Wall Street.


Stocks slumped on Veterans Day on thin volume and a lack of guidance from the Treasury markets. U.S. Treasuries were closed in observance of the holiday; while equities were open it seemed as if many traders opted to take day off.

As it turns out, taking the day off was a great idea. Equities plunged in early trade on weaker global markets and another string of disappointments. A market that relied on consumers to keep it afloat in recent years is now realizing that they have become the anchor. Few industries, or even firms, have managed to avoid the spending slump. Late on Monday, Starbucks reported dismal sales and first thing today Toll Brothers Inc. announced a sharp decline in revenues. In light of weakness among automakers, it is fair to say that this recession has the potential to cut very deep.

A story that hasn't received a lot of attention is the seemingly never-ending plunge in crude oil. The decline in energy prices has been even more relentless than the rally despite pledges of production cuts by OPEC. There are reports of unleaded gasoline priced well below $2 per gallon in certain areas around the country. This provides a significant improvement in the spending capacity of consumers; unfortunately the benefits are being offset by other factors.

Market speculation is being made especially difficult by Government interaction. The desperate state of the financial markets has lured lawmakers around the globe into becoming active participants. At any given time, there is risk of a bail out announcement or another stimulus package, etc. Not only does this have a negative impact on the predictability of the markets, it has substantially increased the risk of participating. This afternoon's trade was a good example. A Tuesday announcement regarding a combined assistance effort involving the government and the mortgage industry seemed to be the driving force behind the equity market recovery. The plan is intended to help troubled homeowners speed up the process of renegotiating their loans.

I am still not convinced that the afternoon recovery will be enough to change the trend. I see the potential for the S&P 500 futures to trade at or near 855 in the coming sessions. Likewise, the Dow could easily see prices near 8,160 and the NASDAQ 1177.



Please note: A mini S&P chart is used because it is better for charting purposes, but trade recommendations are based the full sized S&P unless otherwise noted.


S&P 500 Futures and Options Trading Recommendations
**There is unlimited risk in naked option selling and futures trading

Position Trade -

October 29 - Clients were advised to purchase the November mini S&P 700 puts, fills were at or near $6 or $300.
• November 7 - These are underwater, but not out of the question. Place an order to sell them at or near $15.


November 4 - Buy the November e-mini S&P 850 puts for $6 or less
• November 6 - If you were able to get in on this trade, place an order to sell it at $27 or better (don't get greedy, if you can get out for a little less take it).
• November 7 - You should be out of this trade. Assuming that you were able to get in for $6 and out for $25 you would have been profitable by $950 before commissions and fees.

Please note: A mini-sized Dow chart is used because it is better for charting purposes, but trade recommendations are based the full sized Dow unless otherwise noted.


Dow Jones Futures and Options Trading Recommendations
**There is unlimited risk in naked option selling and futures trading


Position Trade -

Flat

Please note: A mini-NASDAQ chart is used because it is better for charting purposes, trade recommendations will denote whether a mini or full sized contract should be used.


NASDAQ Futures and Options Trading Recommendations
**There is unlimited risk in naked option selling and futures trading

Swing Trade -

Flat





There is substantial risk of loss in trading futures and options.


Past performance is not indicative of future results. The information and data in this report were obtained from sources considered reliable. Their accuracy or completeness is not guaranteed and the giving of the same is not to be deemed as an offer or solicitation on our part with respect to the sale or purchase of any securities or commodities. Any decision to purchase or sell as a result of the opinions expressed in this report will be the full responsibility of the person authorizing such transaction.
 
November 13th, 2008


Volatility spike on Wall Street as Equities Turn the Corner


After three consecutive days of selling pressure, early morning trade on Thursday was destined for lower levels. Weekly jobless claims and dismal Wal-Mart forecasts gave traders a reason to retest the October lows as many technicians have been calling for. However, short covering and bargain hunting managed an impressive intraday turnaround which could extend well into next week.

The Labor Department reported that the number of newly laid-off individuals seeking unemployment benefits jumped last week to the highest level seen since just after September 11, 2001. Not surprisingly, the shrinking employment market has lead to a severe pullback in consumer spending. Intel Corporation shaved a little more than $1 billion from sales forecasts and retail giant Wal-Mart also cut their expectations for the upcoming year.

After penetrating the October lows without the end of the financial markets ensuing, bargain hunters jumped in with both feet. The only thing that is scarier than being in the market is being out of the market as it makes its recovery. Once the rally was triggered, buy stops were hit and panicked investors rushed to jump on the band wagon. Ryan Larson, senior equity trader at Voyageur Asset management used the phrase "herd mentality" to describe the move. He added, "We started going higher -- and you don't want to be the last one on the boat."

Don't underestimate the momentum behind a "bear market bounce". A key reversal leaves the bears panicking to cover positions and the bulls panicking to enter. In the absence of any significant surprises in tomorrow's data, the market seems poised to extend the rally into mid-next week. I see significant resistance near 925 in the S&P but ultimately think that we will trade above 1000 again. Similarly, 8,900 may act as a temporary ceiling in the Dow but short covering alone could bring us back to 9,660. NASDAQ futures look primed for 1277 and possibly 1400 in the coming weeks.

On Wednesday, we were recommending that our clients buy the December 1030 calls for about $300, so far so good. We may be looking to offset these in the coming sessions with a nice profit.

S&P 500 Futures and Options Trading Recommendations

**There is unlimited risk in naked option selling and futures trading

Position Trade -

October 29 - Clients were advised to purchase the November mini S&P 700 puts, fills were at or near $6 or $300.
• November 7 - These are underwater, but not out of the question. Place an order to sell them at or near $15.

November 19 - Our clients were advised to buy the December e- mini S&P 500 1030 calls for $6 in premium or $300.

Please note: A mini-sized Dow chart is used because it is better for charting purposes, but trade recommendations are based the full sized Dow unless otherwise noted.


Dow Jones Futures and Options Trading Recommendations
**There is unlimited risk in naked option selling and futures trading


Position Trade -

Flat

Please note: A mini-NASDAQ chart is used because it is better for charting purposes, trade recommendations will denote whether a mini or full sized contract should be used.


NASDAQ Futures and Options Trading Recommendations
**There is unlimited risk in naked option selling and futures trading

Swing Trade -

Flat





There is substantial risk of loss in trading futures and options.


Past performance is not indicative of future results. The information and data in this report were obtained from sources considered reliable. Their accuracy or completeness is not guaranteed and the giving of the same is not to be deemed as an offer or solicitation on our part with respect to the sale or purchase of any securities or commodities. Any decision to purchase or sell as a result of the opinions expressed in this report will be the full responsibility of the person authorizing such transaction.
 
November 17th, 2008



Volatile intra-day trade in stock indices, but few participants


Citigroup's announcement to cut more than 50,000 jobs, Moody's downgrades on Starbucks bonds and revenue warnings issued by Lowe's kept a cap on equity market buying. However, each dip into negative territory was moderate and met with buying pressure.

The National Association of Business Economists' poll of 50 professional forecasters revealed that the real GDP is expected to fall 2.6% in the fourth quarter and another 1.3% in the first quarter of 2009. The survey suggests that pessimism is growing at a swift pace. NABE President Chris Varvares stated, "Business economists became decidedly more negative on the economic outlook for the next several quarters as a result of the intensification of credit market stresses and evidence of spillover to the real economy."

After spending much of the weekend at the mall, it was obvious that retailers are desperate for sales and consumers are too frightened to take advantage of the opportunities. It is clear that it will take several months or years for the markets to work things out.

Another retest of the lows may be underway in the major indices. Friday's dramatically bearish close leads me to believe that the path of least resistance is lower in the near term. I see support in the S&P near 829 and of course near Thursday's low of 817. However, the market's resilient attempts to hold above 866 makes this a tougher call than it may otherwise be. Assuming another leg down in equities, the Dow should run into support near 8,000 and the NASDAQ at 1130. With that said, traders should be prepared for a very large "bear market bounce" as we approach option expiration. This means that the bears shouldn't get too comfortable and the bulls should be ready to pull the trigger.

The safest course of action is to buy deep out of the money calls in hopes of a sharp recovery. Don't underestimate the potential of the reversal. With market sentiment low and short sellers seemingly comfortable, when the tide turns it will be swift as the bears panic to get out and the bulls panic to get in. For example, a weekly chart of the S&P suggests that a typical market correction could bring prices as high as 1130 without compromising the bear market trend. Similar analysis points toward 10,400 in the Dow and 1600 in the NASDAQ. Naturally, it would take a considerable amount of time to reach such levels but it is important to realize that this is a possibility.


Please note: A mini S&P chart is used because it is better for charting purposes, but trade recommendations are based the full sized S&P unless otherwise noted.


S&P 500 Futures and Options Trading Recommendations
**There is unlimited risk in naked option selling and futures trading

Position Trade -

October 29 - Clients were advised to purchase the November mini S&P 700 puts, fills were at or near $6 or $300.
• November 7 - These are underwater, but not out of the question. Place an order to sell them at or near $15.

November 12 - Our clients were advised to buy the December e- mini S&P 500 1030 calls for $6 in premium or $300.

Please note: A mini-sized Dow chart is used because it is better for charting purposes, but trade recommendations are based the full sized Dow unless otherwise noted.


Dow Jones Futures and Options Trading Recommendations
**There is unlimited risk in naked option selling and futures trading


Position Trade -

Flat

Please note: A mini-NASDAQ chart is used because it is better for charting purposes, trade recommendations will denote whether a mini or full sized contract should be used.



NASDAQ Futures and Options Trading Recommendations
**There is unlimited risk in naked option selling and futures trading

Swing Trade -

Flat





There is substantial risk of loss in trading futures and options.


Past performance is not indicative of future results. The information and data in this report were obtained from sources considered reliable. Their accuracy or completeness is not guaranteed and the giving of the same is not to be deemed as an offer or solicitation on our part with respect to the sale or purchase of any securities or commodities. Any decision to purchase or sell as a result of the opinions expressed in this report will be the full responsibility of the person authorizing such transaction.
 
November 18th, 2008


Directionless stock market trade may point to lower indices.


All eyes were on Capitol Hill as Treasury Secretary Henry Paulson and Fed Chair Ben Bernanke defended the $700 billion bailout. Paulson reiterated reservations in regards to tapping the bailout money to provide mortgage guarantees in an attempt to reduce the number of home foreclosures.

Additionally, Paulson claims that although allowing a U.S. auto company to fail would not be a "good thing" he is opposed to allocating $25 billion of the bailout money to fund struggling car-makers.

The major indices traded nicely higher in early trade but news of a plunge in the homebuilder sentiment index turned the market on a dime. According to the National Association of Home Builders, the housing market index reached another record low as rising unemployment and the ongoing financial crisis saga continues to weigh on home sales. The index is currently sitting at a value of 9 after falling to 14 last month. A reading below 50 indicates a negative outlook in the homebuilding industry.

I hate to say it, but the market may be looking for the 2002 lows in the S&P near 770. In the meantime, there is support at 812 and again at 800. I am not suggesting that a large bounce is out of the question, in fact I think that we may be setting up for a large rally. The problem is that there is a strong possibility that we will run sell stops and make new lows before the reversal occurs.

Dow futures traders should consider support levels near 7,900 and again at 7,650. There is a lot of premium in the puts, it is scary but selling seems to be a good call. I like selling the December mini- Dow 6000 puts for 100 or better.

If you took our recommendation to buy the S&P 500 e-mini 1030 calls, you may want to consider adding on as the market dips. This may mean lowering the strike price and entering for the same premium of $300 or simply adding on to the existing at a better price.

Please note: A mini S&P chart is used because it is better for charting purposes, but trade recommendations are based the full sized S&P unless otherwise noted.


S&P 500 Futures and Options Trading Recommendations
**There is unlimited risk in naked option selling and futures trading

Position Trade -

October 29 - Clients were advised to purchase the November mini S&P 700 puts, fills were at or near $6 or $300.
• November 7 - These are underwater, but not out of the question. Place an order to sell them at or near $15.

November 12 - Our clients were advised to buy the December e- mini S&P 500 1030 calls for $6 in premium or $300.

Please note: A mini-sized Dow chart is used because it is better for charting purposes, but trade recommendations are based the full sized Dow unless otherwise noted.


Dow Jones Futures and Options Trading Recommendations
**There is unlimited risk in naked option selling and futures trading


Position Trade -

November 18 - There is a lot of premium in the puts, it is scary but selling seems to be a good call. I like selling the December mini- Dow 6000 puts for 100 or better. It will take additional weakness to get this filled.

Please note: A mini-NASDAQ chart is used because it is better for charting purposes, trade recommendations will denote whether a mini or full sized contract should be used.


NASDAQ Futures and Options Trading Recommendations
**There is unlimited risk in naked option selling and futures trading

Swing Trade -

Flat







There is substantial risk of loss in trading futures and options.


Past performance is not indicative of future results. The information and data in this report were obtained from sources considered reliable. Their accuracy or completeness is not guaranteed and the giving of the same is not to be deemed as an offer or solicitation on our part with respect to the sale or purchase of any securities or commodities. Any decision to purchase or sell as a result of the opinions expressed in this report will be the full responsibility of the person authorizing such transaction.
 
November 24th, 2008


Recovery in progress, but will it last?


Unfortunately I wasn't able to keep up with my newsletters last week due to, among other things, the Las Vegas Money show and extreme market conditions. During times like this we are forced to prioritize and our clients always come first, newsletters second. With that said, those that are following this newsletter via a free email subscription was provided with briefings. If you are reading this from one of the various websites in which this content is posted, you may be interested in signing up for our free e-blast subscriptions to ensure timely delivery of our comments and recommendations.

Stocks enjoyed another wildly positive day after the U.S. government announced its intentions to bail out Citigroup. Adding to the positive momentum, President elect Obama announced his economic team. While details were spared, the market seemed hopeful as the administration is promising the creation of 2.5 million jobs in the next two years. Expectations seem a bit lofty, leaving the Street with hopes that they can deliver.

While there were rumors of a Citigroup rescue last week, investors sighed in relief as the particulars were released. The U.S government decided late Sunday night to invest $20 billion in Citigroup and guarantee $306 billion in risky assets. The premise behind the move is to restore confidence in the once prominent bank but the behind the scenes impact should be a more stable banking system. Along with the decision to step in, the Fed added "We will continue to use all of our resources to preserve the strength of our banking institutions, and promote the process of repair and recovery and to manage risks." According to Teck-Kin Suan, economist at United Overseas Bank in Singapore, "If they didn't' help, the damage would be beyond imagination."

At this point it seems that the market is happy to see the government step in, the market's consensus of whether or not the Fed is making the right moves will come later.

Each of the major indices reached our downside targets late last week and have since recovered. In the last newsletter, dated Wednesday November 19th, we stated

I still feel as though a bottom will be found shortly but am concerned that we may see 770 before turning around. At this pace, we could see 770 by tomorrow as I have been told that there are several sell stops lingering below 800 and the market's tendency to inflict misery on traders tells me that we will run them...

Our downside objective for the Dow in yesterday's report was 7,900 and we aren't far away. However, 7,650 offers the next level of support and may also be seen in the coming days before the market finds a bottom.


As it turns out, we underestimated the magnitude of the drop but feel as though we called it relatively well. If you participated in the short put recommendations noted below that were based on the premise of the scenario described above becoming a reality, we suggest that you exit to lock in a nice profit.

Conversely, the recommendations to buy calls haven't necessarily worked out as well despite the recent rally. It seems as though there were a lot of call buyers last week pumping up the value of the options. As a result, the value of the December calls haven't really reacted to the futures rally. Nonetheless, I would hang on to them as they could begin looking much better.

We are looking for a rally to 895 in the December S&P and about 8,700 in the Dow. the NASDAQ could see prices as high as 1228 by the end of the week. Remember, Thanksgiving has been historically bullish for stocks!!


Please note: A mini S&P chart is used because it is better for charting purposes, but trade recommendations are based the full sized S&P unless otherwise noted.


S&P 500 Futures and Options Trading Recommendations
**There is unlimited risk in naked option selling and futures trading

Position Trade -

November 12 - Our clients were advised to buy the December e- mini S&P 500 1030 calls for $6 in premium or $300.

November 19 - If you are willing to take on the risk, the premium is looking attractive in puts. I like selling the December e-mini 575 put for $10 or better. This is equivalent to $500 and has a breakeven point of 570. Risk is unlimited below 570.

• This would have been filled on Friday, we recommended buying it back for $3 or less on Monday (you should still be able to get this price or better tomorrow). Assuming a fill at $10 to get in and $3 to get out, the profit would be $350 per contract before commissions and fees.

Please note: A mini-sized Dow chart is used because it is better for charting purposes, but trade recommendations are based the full sized Dow unless otherwise noted.


Dow Jones Futures and Options Trading Recommendations
**There is unlimited risk in naked option selling and futures trading


Position Trade -

November 18 - There is a lot of premium in the puts, it is scary but selling seems to be a good call. I like selling the December mini- Dow 6000 puts for 100 or better. It will take additional weakness to get this filled.
• This would have been filled late last week.
• Place an order to buy this option back for 30 or better (don 't get greedy, if you can get out for a little more you should take it).

Please note: A mini-NASDAQ chart is used because it is better for charting purposes, trade recommendations will denote whether a mini or full sized contract should be used.


NASDAQ Futures and Options Trading Recommendations
**There is unlimited risk in naked option selling and futures trading

Swing Trade -


Flat







There is substantial risk of loss in trading futures and options.


Past performance is not indicative of future results. The information and data in this report were obtained from sources considered reliable. Their accuracy or completeness is not guaranteed and the giving of the same is not to be deemed as an offer or solicitation on our part with respect to the sale or purchase of any securities or commodities. Any decision to purchase or sell as a result of the opinions expressed in this report will be the full responsibility of the person authorizing such transaction.
 
November 25th, 2008


Market looking higher, don't get in its way!


Stocks spent the Tuesday before Thanksgiving digesting one of the biggest two day rallies in history. Despite an early morning rally on news of government plans to aid consumer lending companies, the major indices finished the day near unchanged but did spend a considerable amount of time in negative territory.

It is important to note the magnitude of what we have just witnessed. The market soared nearly 11% through the course of Friday and Monday marking the first back-to-back gains in three weeks.

The Treasury Department and the Federal Reserve are working towards a plan to provide $800 billion to help unfreeze the consumer debt markets. In theory, this will help to make mortgage loans cheaper and more readily available. The attempt to stabilize the credit markets are aimed to entice lenders (credit card companies, student and auto loan providers, etc.) to resume more "normal" levels of lending.

Although you wouldn't know it by looking at the bond market, today's economic data and news events support a struggling yet recovering economy. The Commerce Department's consumer confidence index showed surprising strength. The index was reported at 44.9, well above the sub-40 analyst estimates. The preliminary GDP numbers weren't as promising, but weren't the end of the world either. Gross Domestic Product is believed to have shrunk by .5% in the third quarter.

Keep in mind that the markets like to "give thanks" before and after the Thanksgiving holiday. The day before, and the day after, turkey day have historically been positive for equities.

We are still looking for an advance above 890 in the S&P and 8,700 in the Dow. However, today's highs weren't incredibly off the mark. Therefore, our outlook higher should be taken with caution. With that said, seasonals are suggesting a rally into week's end and the light volume seems to be helping the bulls' case. Let's see what happens.


Please note: A mini S&P chart is used because it is better for charting purposes, but trade recommendations are based the full sized S&P unless otherwise noted.


S&P 500 Futures and Options Trading Recommendations
**There is unlimited risk in naked option selling and futures trading

Position Trade -

November 12 - Our clients were advised to buy the December e- mini S&P 500 1030 calls for $6 in premium or $300.

November 19 - If you are willing to take on the risk, the premium is looking attractive in puts. I like selling the December e-mini 575 put for $10 or better. This is equivalent to $500 and has a breakeven point of 570. Risk is unlimited below 570.

• This would have been filled on Friday, we recommended buying it back for $3 or less on Monday (you should still be able to get this price or better tomorrow). Assuming a fill at $10 to get in and $3 to get out, the profit would be $350 per contract before commissions and fees.

Please note: A mini-sized Dow chart is used because it is better for charting purposes, but trade recommendations are based the full sized Dow unless otherwise noted.


Dow Jones Futures and Options Trading Recommendations
**There is unlimited risk in naked option selling and futures trading


Position Trade -

November 18 - There is a lot of premium in the puts, it is scary but selling seems to be a good call. I like selling the December mini- Dow 6000 puts for 100 or better. It will take additional weakness to get this filled.
• This would have been filled late last week.
• Place an order to buy this option back for 30 or better (don 't get greedy, if you can get out for a little more you should take it).

Please note: A mini-NASDAQ chart is used because it is better for charting purposes, trade recommendations will denote whether a mini or full sized contract should be used.


NASDAQ Futures and Options Trading Recommendations
**There is unlimited risk in naked option selling and futures trading

Swing Trade -

Flat





There is substantial risk of loss in trading futures and options.


Past performance is not indicative of future results. The information and data in this report were obtained from sources considered reliable. Their accuracy or completeness is not guaranteed and the giving of the same is not to be deemed as an offer or solicitation on our part with respect to the sale or purchase of any securities or commodities. Any decision to purchase or sell as a result of the opinions expressed in this report will be the full responsibility of the person authorizing such transaction.
 
November 26th, 2008


Thin volume seems to favor a stock market rally, more up!


The equity market celebrated Thanksgiving a day early and if history has anything to do with it the party should extend into Friday's session. The futures markets will trade electronically overnight as usual, but trade will be halted tomorrow morning at 10:30 central time in observance of the holiday. Trading volume has been extremely light and that may be contributing to the gains.

What has given me a bit of hope in regards to this rally is the fact that everyone is having doubts. Regardless of the business news television station that you frequent or the websites you faithfully read, you are likely being exposed to far more opinions calling for another failed rally than the opposite. Sometimes when "everyone" thinks that a market will do one thing, that is precisely when it doesn't. There is a lot less talk about this being the bottom than we have witnessed in previous corrections, and that could mean that the bears are in and they are too comfortable. If the S&P can hold above 888 in the coming days, I think that we will see a much larger move to 1000. If I am proven wrong, another retest of the lows should prove to be a great place to be a put option seller and a call buyer.

I think that the holiday is a great excuse for traders and investors to take a step back from the markets and look at things logically. As a futures and options trader, it is easy to get caught up in what the market may do today or tomorrow and we often forget to look at the big picture.

There are a lot of comparisons to the current economy to that of the Great Depression. I realize that these comparisons are forward looking. The possibility of a second depression exists, but the market looks to have assumed that it is in fact going to happen. I personally think that there is a lot of overreaction in the marketplace. The Great Depression saw a negative GDP of 13%, an unemployment rate of nearly 24%, a negative inflation rate of nearly 10% and a 9% drop in consumer spending.

On a percentage basis, the current bear market has surpassed the 1987 downturn, the 2000 tech bubble collapse and even the Arab oil embargo induced bear market of the 1970's. On fact, with the exception of the 1970's, this downturn has the others beat by double digits to leave the equity markets grossly overvalued. Cheap doesn't mean that things can't get cheaper, but it does mean that large dips shouldn't be taken for granted. For example, the risk of buying and holding one e-mini futures contract is less than $45,000 even after today's rally. In other words, if you go long the S&P here and the world comes to an end you will only lose $45,000. In essence, these are the same odds that you would have buying an S&P equity index as there is no leverage. However, if you have a $45,000 account and you purchase two e-mini contracts you would have enough capital to ride it all the way down to under 450 in the S&P. On the contrary, if the market recovers to 1500 your account would be worth a little over $100,000. If you have the risk capital, it may be worth the bet. With that said, you would have to promise yourself that you won't drive yourself crazy watching it.


Please note: A mini S&P chart is used because it is better for charting purposes, but trade recommendations are based the full sized S&P unless otherwise noted.


S&P 500 Futures and Options Trading Recommendations
**There is unlimited risk in naked option selling and futures trading

Position Trade -

November 12 - Our clients were advised to buy the December e- mini S&P 500 1030 calls for $6 in premium or $300.

November 19 - If you are willing to take on the risk, the premium is looking attractive in puts. I like selling the December e-mini 575 put for $10 or better. This is equivalent to $500 and has a breakeven point of 570. Risk is unlimited below 570.

• This would have been filled on Friday, we recommended buying it back for $3 or less on Monday (you should still be able to get this price or better tomorrow). Assuming a fill at $10 to get in and $3 to get out, the profit would be $350 per contract before commissions and fees.

Please note: A mini-sized Dow chart is used because it is better for charting purposes, but trade recommendations are based the full sized Dow unless otherwise noted.


Dow Jones Futures and Options Trading Recommendations
**There is unlimited risk in naked option selling and futures trading


Position Trade -

November 18 - There is a lot of premium in the puts, it is scary but selling seems to be a good call. I like selling the December mini- Dow 6000 puts for 100 or better. It will take additional weakness to get this filled.
• This would have been filled late last week.
• Place an order to buy this option back for 30 or better (don 't get greedy, if you can get out for a little more you should take it).
• You should be out of this with a nice profit!!

Please note: A mini-NASDAQ chart is used because it is better for charting purposes, trade recommendations will denote whether a mini or full sized contract should be used.


NASDAQ Futures and Options Trading Recommendations
**There is unlimited risk in naked option selling and futures trading

Swing Trade -

Flat




There is substantial risk of loss in trading futures and options.


Past performance is not indicative of future results. The information and data in this report were obtained from sources considered reliable. Their accuracy or completeness is not guaranteed and the giving of the same is not to be deemed as an offer or solicitation on our part with respect to the sale or purchase of any securities or commodities. Any decision to purchase or sell as a result of the opinions expressed in this report will be the full responsibility of the person authorizing such transaction.
 
December 1st, 2008


Record-breaking stock rally ends abruptly.


After posting the best consecutive five trading days in 75 years, the major indices collapsed under pressure. The sudden turn in sentiment is leaving many to wonder if the holiday is over, or if the Santa Claus rally will save the markets. The bulls are likely taken back by the reversal but probably shouldn't be. If the markets are going trade higher in a healthy manner, it is necessary to see digestion. Without back and filling, it is like a house of cards that can be blown down at any moment.

The selling commenced on mixed news from retailers following Black Friday. Despite initial reports that the holiday shopping season was better than some had feared, there were also signs that Americans are reluctant to spend money. Meanwhile, weak ISM manufacturing and construction spending data added to the bearish sentiment. Mike Stanfield, chief executive of VSR Financial Services, "Unfortunately, two-thirds of the American economy is base on the spending of the American consumer." He added, "When the consumer pulls back, it's very hard for the economy to gain much traction."

Additionally, the National Bureau of Economic Research panel announced that the recession officially began in December of 2007. The NBER uses an alternative method to the conventional negative GDP in their research and claims it to be more "precise".

I came into the day expecting a pullback, but with overall high hopes. Today's trade had very little to preserve my inner bull. In fact, another flush may be underway if the indices can't hold Wednesday's lows. At this point, I guess you could say that I am "on the fence" but maintaining a slightly higher bias. Assuming that the 50% retracement of the move higher holds, we should see another run at intermediate term resistance at 8,590 in the Dow, 880 in the S&P and 1196 in the NASDAQ. Failure at current levels could translate into another retest of the lows.


Please note: A mini S&P chart is used because it is better for charting purposes, but trade recommendations are based the full sized S&P unless otherwise noted.


S&P 500 Futures and Options Trading Recommendations
**There is unlimited risk in naked option selling and futures trading

Position Trade -

November 12 - Our clients were advised to buy the December e- mini S&P 500 1030 calls for $6 in premium or $300.

November 19 - If you are willing to take on the risk, the premium is looking attractive in puts. I like selling the December e-mini 575 put for $10 or better. This is equivalent to $500 and has a breakeven point of 570. Risk is unlimited below 570.

• This would have been filled on Friday, we recommended buying it back for $3 or less on Monday (you should still be able to get this price or better tomorrow). Assuming a fill at $10 to get in and $3 to get out, the profit would be $350 per contract before commissions and fees.

Please note: A mini-sized Dow chart is used because it is better for charting purposes, but trade recommendations are based the full sized Dow unless otherwise noted.


Dow Jones Futures and Options Trading Recommendations
**There is unlimited risk in naked option selling and futures trading


Position Trade -

November 18 - There is a lot of premium in the puts, it is scary but selling seems to be a good call. I like selling the December mini- Dow 6000 puts for 100 or better. It will take additional weakness to get this filled.
• This would have been filled late last week.
• Place an order to buy this option back for 30 or better (don 't get greedy, if you can get out for a little more you should take it).
• You should be out of this with a nice profit!!

Please note: A mini-NASDAQ chart is used because it is better for charting purposes, trade recommendations will denote whether a mini or full sized contract should be used.


NASDAQ Futures and Options Trading Recommendations
**There is unlimited risk in naked option selling and futures trading

Swing Trade -

Flat






There is substantial risk of loss in trading futures and options.


Past performance is not indicative of future results. The information and data in this report were obtained from sources considered reliable. Their accuracy or completeness is not guaranteed and the giving of the same is not to be deemed as an offer or solicitation on our part with respect to the sale or purchase of any securities or commodities. Any decision to purchase or sell as a result of the opinions expressed in this report will be the full responsibility of the person authorizing such transaction.
 
December 2nd, 2008


Bouncing bulls, but bears reign.


Equities traded considerably higher following yesterday's mass carnage, but the market tone remains questionable. The day-to-day direction of the market is highly uncertain, but I do believe that we are in the process of finding a bottom. The highly volatile and essentially directionless trade witnessed in the most recent two months of trading supports this premise as markets have a tendency to behave erratically before a large trend change. However, the process can be long and painful and may even include another new low before all is said and done.

The early morning technical rally was thwarted by news of weak auto sales. U.S. sales are on pace for another record low in November. Do not forget that October's seasonally adjusted sales rate of 10.6 million was the weakest reading in over 25 years. Analysts were calling for the November sales to come in slightly better due to aggressive incentive programs. However, domestic auto sales are on pace to see another record low as Toyota, Honda and Ford all report a decrease in sales of over 30%. Ironically (or maybe not so ironically), the sales reports were announced on the same day the U.S. automakers were scheduled to testify in front of Congress. The "big 3" will once again be asking for a $25 billion federal loan in an attempt to avoid filing for bankruptcy.

Meanwhile, crude oil looks to be comfortably trading below $50 per barrel. The price of crude oil has been relatively positively correlated to the stock market as energy traders are equating sluggish equity markets with a weak economy and thus weak demand.

The relationship between equities and interest rates has also been skewed in light of economic struggles. History suggests that stocks and bonds are negatively correlated and accordingly should move in the opposite directions. However, in recent months there has been a disconnect. We are now finding equities reacting negatively to higher bond prices. While logic tells us that lower yields should be prosperous for corporate growth, traders are seeing it as a sign of a lack of confidence in the system. Accordingly, stocks seem to be holding back as yields decline.

In yesterday's newsletter I made the following statement and it still applies:

At this point, I guess you could say that I am "on the fence" but maintaining a slightly higher bias. Assuming that the 50% retracement of the move higher holds, we should see another run at intermediate term resistance at 8,590 in the Dow, 880 in the S&P and 1196 in the NASDAQ. Failure at current levels could translate into another retest of the lows.


Please note: A mini S&P chart is used because it is better for charting purposes, but trade recommendations are based the full sized S&P unless otherwise noted.


S&P 500 Futures and Options Trading Recommendations
**There is unlimited risk in naked option selling and futures trading

Position Trade -

November 12 - Our clients were advised to buy the December e- mini S&P 500 1030 calls for $6 in premium or $300.

Please note: A mini-sized Dow chart is used because it is better for charting purposes, but trade recommendations are based the full sized Dow unless otherwise noted.


Dow Jones Futures and Options Trading Recommendations
**There is unlimited risk in naked option selling and futures trading


Position Trade -

Please note: A mini-NASDAQ chart is used because it is better for charting purposes, trade recommendations will denote whether a mini or full sized contract should be used.


NASDAQ Futures and Options Trading Recommendations
**There is unlimited risk in naked option selling and futures trading

Swing Trade -

Flat





There is substantial risk of loss in trading futures and options.


Past performance is not indicative of future results. The information and data in this report were obtained from sources considered reliable. Their accuracy or completeness is not guaranteed and the giving of the same is not to be deemed as an offer or solicitation on our part with respect to the sale or purchase of any securities or commodities. Any decision to purchase or sell as a result of the opinions expressed in this report will be the full responsibility of the person authorizing such transaction.
 
December 4th, 2008


Stocks struggle on auto-maker drama.


What seemed like a relatively productive session, turned into another nightmare on Wall Street. Equities dropped sharply in a late reaction to the dismal data as of late, and anticipation of a poor employment report tomorrow morning. With the exception of the last hour of the trading day, the decline was relatively orderly despite discouraging sales reports from retailers.

Also weighing on trade, significant job cuts at AT&T and DuPont reminded investors of the soon to be released jobs data. Market declines ahead of the employment report isn't something new; in fact; it has been the pattern as of late. Non-Farm payroll estimates seem to be pegging a loss of 300,000, but I have seen some expectations for 350,000 and as low as 200,000. One thing is for sure, everyone will be watching and the volatility risk is high. It seems as though most are counting on a terrible number. In theory, this would favor the odds of a post announcement rally but only time will tell how things play out.

Each of the major indices has failed to break near term resistance after two days worth of valiant efforts. This makes me question whether or not the rally will be able to trigger from current levels or if the S&P must trade below 800 one more time. There are too many cards on the table to call a direction in tomorrow's trade. However, there is heavy support near 775 in the S&P and I could be an attractive level to be a bull. there is resistance near 860, consistent trade over this level gives me confidence in an advance to 950.

Unlike yesterday, the Dow closed below its 20-day moving average to leave the index with a slightly lower bias from a technical standpoint. However, the jobs number will have a big part to play on the direction of the market from its current crossroads. My gut tells me higher, but I wouldn't be willing to recommend playing the upside until we see a clear move above 8,445. However, should the employment numbers disappoint 7,752 could be the next stopping point and an opportune time to be a bull.

The NASDAQ becomes a great buy near 1043, or on a break above 1165 but is a risky trade either way at current levels and circumstances.

Please note: A mini S&P chart is used because it is better for charting purposes, but trade recommendations are based the full sized S&P unless otherwise noted.


S&P 500 Futures and Options Trading Recommendations
**There is unlimited risk in naked option selling and futures trading

Position Trade -

November 12 - Our clients were advised to buy the December e- mini S&P 500 1030 calls for $6 in premium or $300.

Please note: A mini-sized Dow chart is used because it is better for charting purposes, but trade recommendations are based the full sized Dow unless otherwise noted.


Dow Jones Futures and Options Trading Recommendations
**There is unlimited risk in naked option selling and futures trading


Position Trade -

Please note: A mini-NASDAQ chart is used because it is better for charting purposes, trade recommendations will denote whether a mini or full sized contract should be used.


NASDAQ Futures and Options Trading Recommendations
**There is unlimited risk in naked option selling and futures trading

Swing Trade -

Flat





There is substantial risk of loss in trading futures and options.


Past performance is not indicative of future results. The information and data in this report were obtained from sources considered reliable. Their accuracy or completeness is not guaranteed and the giving of the same is not to be deemed as an offer or solicitation on our part with respect to the sale or purchase of any securities or commodities. Any decision to purchase or sell as a result of the opinions expressed in this report will be the full responsibility of the person authorizing such transaction.
 
December 8th, 2008


Mutual fund Monday and short covering extends stock index gains.


Expectations of an auto-maker deal and a sense that all of the bad news must be out, has energized stock indices. The rally comes on the heels of the worst jobs number in over 30 years as well as news of a bankruptcy filing of media conglomerate Tribune Co. It just goes to show, that trading strictly on fundamental analysis is difficult. The market often prices in the news before ever being released or confirmed.

Many claim that the market has grown optimistic in regards to President-elect Obama's plat to boost the crippled economy. Over the weekend, Obama announced plans for the largest U.S. public works spending program since the creation of the interstate highway system. In theory, the government program will create work and business for material giant Alcoa and heavy-equipment maker Caterpillar Inc. However, I wonder if free market enthusiasts will be able to maintain optimism. We all know that the government programs tend to be inefficient...as an American and a 401k holder I am hoping for the best.

According to White House officials, the auto deal is "very likely". At the time of this report, it wasn't finalized but said to be undergoing the finishing touches. Under the proposed plan, carmakers' would have access to emergency loans on December 15th. If the car companies don't take the initiatives detailed in the bill to reorganize the money would be recalled by February 15th.

It is my understanding that the carmakers will be provided with $15 billion of the previously approved TARP money. However, this is expected to only be the beginning. Some analysts believe that the "big three" will ultimately need nearly $100 billion to stay afloat.




In Friday's newsletter, we made the following statement:

Nonetheless, today's session seemed to be a victory for the bulls. If this assumption is correct, next week should prove to be an early Christmas on Wall Street. I am looking for 945 in the S&P, 9,130 in the Dow and 1278 in the NASDAQ.

We are still of the same opinion, but have slightly adjusted the targets. I see the next major resistance area in the S&P at 940, 9,116 in the Dow and 1263 in the NASDAQ.

Please note: A mini S&P chart is used because it is better for charting purposes, but trade recommendations are based the full sized S&P unless otherwise noted.


S&P 500 Futures and Options Trading Recommendations
**There is unlimited risk in naked option selling and futures trading

Position Trade -

November 12 - Our clients were advised to buy the December e- mini S&P 500 1030 calls for $6 in premium or $300.

Please note: A mini-sized Dow chart is used because it is better for charting purposes, but trade recommendations are based the full sized Dow unless otherwise noted.


Dow Jones Futures and Options Trading Recommendations
**There is unlimited risk in naked option selling and futures trading


Position Trade -

Please note: A mini-NASDAQ chart is used because it is better for charting purposes, trade recommendations will denote whether a mini or full sized contract should be used.


NASDAQ Futures and Options Trading Recommendations
**There is unlimited risk in naked option selling and futures trading

Swing Trade -

Flat





There is substantial risk of loss in trading futures and options.


Past performance is not indicative of future results. The information and data in this report were obtained from sources considered reliable. Their accuracy or completeness is not guaranteed and the giving of the same is not to be deemed as an offer or solicitation on our part with respect to the sale or purchase of any securities or commodities. Any decision to purchase or sell as a result of the opinions expressed in this report will be the full responsibility of the person authorizing such transaction.
 
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